Adeyemo emphasized the necessity of enhancing secondary sanctions capabilities within the Treasury, directed towards digital asset providers.
Wally Adeyemo, Undersecretary of the U.S. Treasury, released an official statement saying Russia is increasingly resorting to alternative payment methods, such as the stablecoin Tether (USDT), to evade sanctions and sustain its military operations.
The hearing, titled “Countering Illicit Finance, Terrorism, and Sanctions Evasion,” marks the committee’s second discussion on the topic within the last six months.
Russia Employs Tether to Evade Sanctions
In his testimony, Ademayo shed light on the exploitation of crypto assets by terrorist groups and rogue states to obscure their financial activities.
He noted instances like al-Qaeda’s Bitcoin use and transactions between Islamic Revolutionary Guard Corps-Quds Force and Hamas. There was also concern about Russia’s increased reliance on stablecoins such as Tether, which challenges the effectiveness of sanctions.
Adeyemo stressed that the Treasury needs to expand efforts to counter bad actors even though it has made strides in combating illicit finance. He added that they should note that “illicit actors” will continue to use crypto and digital assets to move things since they cannot stop them and do not have the necessary tools.
Adeyemo urged additional secondary sanctions tools within the Treasury, specifically targeting digital asset providers. He also called on Congress to pass legislation that would widen the agency’s jurisdiction to cover key players and core activities in the digital asset ecosystem. In addition, he emphasized the importance of laws addressing regulatory challenges posed by foreign crypto companies for effective oversight.
Debates Continue on Crypto’s Use Among Criminal Networks
During the hearing, Senator Elizabeth Warren of Massachusetts pointed out that it’s not just terrorist organizations like Hamas using cryptocurrency for financing. She added that North Korean ransomware groups, drug traffickers, and distributors of child sexual abuse materials are also utilizing crypto as a means to move funds.
On the other hand, some Republican committee members argued that Democrats, particularly under the Biden administration, are overly focusing on cryptocurrencies in discussions about combating illicit financial activities. Senator Tim Scott of South Carolina criticized framing the conversation solely around digital assets, viewing it as a scapegoat for larger issues related to illicit financing.
Bipartisan bills addressing sanctions evasion and crypto began surfacing in 2022 amid concerns about Russian actors turning to digital assets as a loophole. Senators Warren and Roger Marshall of Kansas reintroduced the Digital Asset Anti-Money Laundering Act of 2023 last summer. This legislation aimed to subject “crypto participants,” including wallet providers, miners, and validators, to compliance requirements.
Another bipartisan effort, the Crypto Asset National Security Enhancement Act of 2023, was introduced in July, sponsored by Senators Jack Reed of Rhode Island, Mark Warner of Virginia, Mike Rounds of South Dakota, and Mitt Romney of Utah. However, neither bill has progressed beyond the committee markup stage.